Introduction
When it comes to building and property renovations, it is easy to overlook the technical nitty-gritty, and often just plain boring details of building contracts which often gets lost in the process of designing or picking out retro-chic furniture for your new property. Often, we put out trust into our selected builders to deliver our project on time and more importantly, within budget! But what happens when the builder fails to deliver? What rights, as a consumer, do you have to force the builder in rectifying defects? These are questions that consumers often fail to consider before hastily entering into building contracts.
In this article, we will breakdown and identify common terms and conditions in the most commonly used Victorian building contracts that you should be aware of. Don’t get caught unawares! Do I need to enter into a building contract? Simply, if you’re engaging a builder or a contractor to undertake building works which costs $10,000.00 or more, the builder needs to enter into a building contract with you. If they do not, do not proceed with the work. Assuming that your building works are for $10,000.00 or more, you will need to enter into a building contract with the builder or contractor if it is for works including:
Although you are not required to have a contract with the contractor for the following works, we recommend that you always enter into a contract with any contractor that is undertaking works on your behalf:
What are the common types of building contracts in Victoria?
In Victoria, most builders and contractors will present you with the following types of contracts or an amended version of the following types of contracts which have been prepared by various professional bodies in ensuring that the terms comply with the relevant laws and regulations under the Domestic Building Contracts Act (Vic) 1995 and the Domestic Building Contracts Regulations (Vic) 2017:
These contracts are easily identifiable as they will be endorsed with either the Master Builder’s Association or the Victorian Building Authority’s logo. If you are presented with a building contract which isn’t endorsed with these logos, make sure to ask your builder or contractor if their contract has been derived from either of the above two contracts. If your builder or contractor confirms that they’ve provided you their version of the above two contracts, be sure to ask them what, if any, amendments they have made to the standard Master Builder or VBA contracts (get this in writing).
Common terms to look out for
Liquidated Damages: your contract will most likely have a liquidated damages clause. This clause represents a genuine estimate of the daily loss you will incur or suffer in the event that the builder or contractor fails to deliver your build within the time stated in the contract. This section of the contract is often left blank for the parties to fill in.
Caution should be had when nominating a figure in this section as any amount inserted needs to reflect a genuine and reasonable estimate of the loss that you will suffer. Therefore, do not be tempted to insert an over-inflated figure as this may be deemed a penalty and therefore unenforceable against the builder.
Insurance: your contract will most likely have an insurance clause which nominates the party responsible for obtaining insurance for the build. Where possible, always ensure that the builder or contractor has current insurance policies for the works, public liability and workers insurance before they commence any works. We also recommend that you get the builder or contractor to include you as an, “interest party” to the insurance policy so that you can make a claim on the policy without requiring the builder to trigger the claim. If you’ve asked the builder or contractor for a copy of their current insurance policy and they are unable to produce it, do not start the works.
Variations: your contract will most likely have a variations clause which deals with the manner in which variations are to be agreed upon or denied. Many building projects go over budget as a result of unforeseen variations or when the parties fail to adhere to the procedures set out in the contract for approving or denying variations. Therefore, before agreeing to any type of variation, you should familiarise yourself with the scope of works to ensure whether the builder or contractors proposed variation is in fact a variation to the initial scope of works. Don’t get caught out! If you do agree to the variation, make sure that you document the builder or contractors request for variation, including the exact scope of the proposed works, and your agreement to it. Don’t just take the builder or contractor’s word as you may be caught out if the variation works includes works that you did not initially agree to.
Order of precedence: your contract will most likely have an order of precedence clause which deals with the order in which documents additional to the contract, such as architectural drawings, construction drawings, specifications, engineering drawings and landscaping drawings will take precedent over the other in the event that one document is ambiguous or contradicts the other. This is especially important if you’ve agreed with the builder on a certain feature or design that hasn’t (for whatever reason) been included in the final set of drawings. We always recommend for special designs to be annexed to the Contract as annexure to avoid any doubt that it (being the special design feature), is incorporated into the terms of the contract.
Conclusion
Before entering into any contract with a builder or contractor, make sure that you know what you’re signing up for and read the contract to ensure that you are familiar with its terms. A once-over of the contract, even if it is monotonous, could mean the difference between having a dispute with the builder and calling them up on a breach of the contract.
At Ark Legal, we have experienced solicitors who can review and prepare your building contract to ensure that your build goes smoothly and that your rights are protect.
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